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Proposed Senate USPS reforms could save $17 billion

Postal Service reform coming out of the Senate would save the agency just under
$17 billion dollars, including the costs of implementation, according to a new
Congressional Budget Office estimate.

The bill would extend the postage rate increase, let USPS cut back delivery to
only five days a week and change the payments made to the Postal Service Retiree
Health Benefits fund, among other changes.

"The bill would result in off-budget savings of about $36 billion over the 2015-
2024 period and on-budget costs of about $19 billion over the same period," the
report stated. "Combining those effects, CBO estimates that the net budgetary
savings from enacting S. 1486 would be about $17 billion over the 2015-2024
period. All of those effects reflect changes in direct spending."

CBO estimated discretionary costs over the next 10 years would hit $3.3 billion,
"subject to appropriation of the necessary amounts."

In December 2013, the Postal Regulatory Commission temporarily raised postal
prices by 4.3 percent for particular mail services. The new bill would make this
price change permanent and bring the USPS an estimated $15.7 billion more net
revenue by 2024, according to CBO.

Under the new bill, USPS "expects that beginning in 2019 it would eliminate most
mail delivery on Saturdays but continue to deliver packages six
days a week," the report stated. CBO estimated the Postal Service could save $1.5
billion annually by cutting back on shipment days, which would drop to $1.3
billion by 2024 based on the assumption USPS would use funds to lower postage
rates.

Under current regulations, the Postal Service must also contribute money to the
Federal Employees Health Benefits program as well as to the Postal Service Retiree
Health Benefits Fund (PSRHBF) to help cover retirees' and future retirees' health
insurance premiums. USPS has not made payments toward the future retirees' fund
over the last four years due to its poor financial situation.

With the new bill, USPS would no longer be required to make direct payments to the
FEHB fund over the next two years, stated CBO. Instead, the PSRHBF would cover the
Postal Service retiree premiums. USPS would not have to prefund retirees' health
benefits through PSRHBF over the next two years, but the bill would require the
agency to make annual payments to the fund for normal and amortization costs
starting in 2016 as opposed to 2017. CBO estimated that USPS would save $4.1
billion in costs associated with retiree health benefits over the 2017-2024
period.

The bill would also allow USPS to receive any extra funds from the USPS Federal
Employees Retirement System account in order to pay off debt to the Treasury by
the end of 2013.

Other money-saving reforms would include the use of postal-specific (instead of
government-wide) data to figure out retirement benefits, establishing a Postal Service
Health Benefits Program and reducing payments to most workers with benefits from
the Federal Employees' Compensation Act, stated the report.